While trading sites such as Intrade allow traders to place actual money bets on which candidate will win the presidency for the next four years, public opinion is also manifested in the stock market. There are probably as many ways to analyze what the stock market thinks as there are analysts, but my favorite is looking at each candidate’s favorite initiatives.

To be clear, I am not going to predict a winner. Take the following analysis as one piece of a very complex prognostication puzzle.

With Governor Romney, we know what he favors. From the Keystone pipeline to his debate quote, “I like coal,” it is clear that one of his focuses will be on energy and coal in particular. Let’s start there.

Many analysts look at the Market Vectors Coal exchange-traded fund
KOL, -0.67%
as the representative for the industry, but 60% of its value comes from foreign stocks. For the purposes of determining what the U.S. stock market thinks about possible energy policy after the election, I prefer the Dow Jones US Coal Index, which unfortunately cannot be bought or sold directly.

To be sure, the correlation between the two is very high. But since the summer, the Market Vectors ETF has been stuck in a trading range while the DJ index has already broken out to the upside (see chart 1).

The technicals are positive although not gangbusters. Prices have indeed made higher highs and higher lows. Volume also expanded during the October rally to suggest investors are taking note. What gives me pause it its relative performance vs. the broader market, as it only outperformed by a small amount.

Within the index, such stocks as Peabody Energy
BTU, -2.12%
and James River Coal
US:JRCC
have moved above both their respective 50- and 200-day moving averages. And Consol Energy
CNX, -0.20%
formed a “golden cross” when its 50-day average moved above its 200-day.

The tide has turned in the coal sector and that bodes well for the challenger.

The president, on the other hand, is associated with health care and green energy in a positive way and possibly banking and oil companies in a negative way. It is a bit harder to isolate just one sector to represent the President’s agenda so let’s just take a brief look at the most visible — green energy.

Unfortunately, most of the publicly traded solar-energy companies are based in China. Most of the publicly traded wind stocks are traded in Europe. But the Powershares Wilderhill Clean Energy ETF
PBW, +0.44%
covers a wider selection of green-related stocks and is nearly 80% U.S.-based.

While component stocks within the ETF are well-capitalized and active, the ETF itself is too thinly traded for direct investment. However, we can still use it to get a feel for the market’s opinion on the green-energy sector.

As of late October, that opinion is not good (see Chart 2). The ETF recently fell to an all-time low and is approximately 30% below its bottom at the end of the last bear market. Momentum remains to the downside, too.

I do not want to put too much emphasis on green-energy stocks as most of them are quite low priced and many are not actively traded. But the charts are indeed weak and that does not bode well for the White House incumbent.

Again, this is not a prediction and is only one part of the puzzle. There are far too many variables to watch even when restricting analysis to the stock market. How investors view the regulatory climate, Fed policy, social issues and many other factors also play big roles. But for those who are assembling a portfolio of election prognostications, coal vs. green energy analysis leans towards the challenger.

Michael Kahn writes the Getting Technical column for Barron’s Online , which analyzes sectors and markets. Sign up for a free technical analysis chart of the day at Quick Takes Pro.

Michael
Kahn

Michael Kahn, a chartered market technician (CMT), is a columnist for MarketWatch as well as Barrons.com, where he writes the “Getting Technical” column. He is the author of three books on charting, contributes to several trading and investing websites, and speaks at industry events.

Michael
Kahn

Michael Kahn, a chartered market technician (CMT), is a columnist for MarketWatch as well as Barrons.com, where he writes the “Getting Technical” column. He is the author of three books on charting, contributes to several trading and investing websites, and speaks at industry events.

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